Six pages or 60? What to expect from an IGC report

As IGCs are new creations, there will be much industry interest in the content of these first annual reports, in particular whether they will be tick-box reports designed to meet the bare minimum requirements of the Financial Conduct Authority, or more consumer-focused 'art-work' reports aimed at members.   

Regardless of the length or content of the IGC reports, it is questionable whether they will actually be read by any of the plan members

While IGCs are charged with operating in the best interests of plan members and a majority of the committee must be independent, their role is solely supervisory and their actual power to influence the providers that appoint them or the operations of the plans which they oversee is questionable.

Perhaps the biggest influence an IGC has is the content, or lack of content, of their annual report. 

Where IGCs are comfortable with the way the provider has administered its pension plans, preparation of the annual report should be a relatively straightforward process. 

The chair of the IGC might want to use the template published by the Society of Pension Professionals as a starting point, which could result in a succinct report of around six pages. 

Process of negotiation 

However, the position will become more complicated where the IGC has concerns about their provider's operations. There will doubtless be some difficult discussions between the IGC and the provider before publication. 

Providers will not want their dirty laundry being aired in public – particularly not in front of their competitors. 

In these cases we might find the IGC's report is carefully wordsmithed by a process of negotiation to produce compromise wording that both the provider and the IGC can live with. Such reports are likely to be lengthier.   

Regardless of the length or content of the IGC reports, it is questionable whether they will actually be read by any of the plan members.

Providers will not want their dirty laundry being aired in public – particularly not in front of their competitors

With such a woefully low level of member engagement in pensions, it is unlikely members will take the time to read a regulatory report about their pension plan – indeed most will not even know such reports exist.  

Of course, engagement requires some skin in the game, and given that the average pot of an auto-enrolled member is likely to be less than £300, it's no wonder members will have no interest in reading about how their plans provide value for money or how the IGCs have considered their interests.

Reports a potential defence for employers 

Even though plan members may show little interest in an IGC report, the documents are likely to be of interest to those employers who selected the plan for their staff, or those looking to participate in a plan. 

Some employers are concerned claims may be made against them by former employees if the expected level of benefit is not delivered, and that somehow the law will develop so that employers would have a duty to monitor and review the performance of the contract-based plans selected for employees. 

Employers will now have a potential defence to any such claims by pointing out that it was the duty of the IGC to ensure the plan was operated in members' interests. 

However, even where an IGC report hints at concerns with a provider's plan, the options available to a participating employer are limited.

Switching a pension provider, particularly if employees are to be encouraged to transfer-out accrued benefits, is not a simple task, and one most employers will be loath to do other than in exceptional circumstances. 

A complaint or discussion with the provider or the IGC, if it will engage with the employer, may in reality be the only option.

While it is early days and no doubt the system will develop, the concept of IGC annual reports could take some time to settle in.

Duncan Buchanan is president of the Society of Pension Professionals and partner at law firm Hogan Lovells